A second mortgage is a loan secured by real estate that already has a first mortgage on it. The maximum amount of the second mortgage is determined by the equity in your home. Equity is calculated as the difference between what is owed on the home (i.e. total amount of loans) and the value of your home.
Why Take out a Second Mortgage?
Many people use second mortgages to pay off credit card debts or other kinds of debts, seeking to lower their total monthly payments. Taking out second mortgages is a way to save money, as interest from second mortgages is deductible, while credit card interest is not. Other reasons you might want to take out a second mortgages might include obtaining additional finance for home improvements and business loans.
What Credit Do I Need to Get a Second Mortgage?
As in first mortgages, there are a wide variety of programs to fit most every credit need. If you have perfect credit, there are many programs out there who will loan you up to 125% of your home's equity. However, the worse your credit, the higher the interest rates charged and the less you can borrow against your equity.
What Types of Second Mortgages Are There?
The types of second mortgages are the same as those available for first mortgages. Second mortgages may be fixed-rate or adjustable-rate.
Should I Consult a Real Estate Attorney?
Buying and financing a piece of real estate can be one of the most burdensome financial endeavors you pursue. An experienced real estate attorney can advise you of the different mortgage financing options depending on whether you are planning on taking out a first or second mortgage. An attorney can also review any financial documents, and advise you about your obligations and the best way to proceed.